The Big Five: A Safe E-biz Harbor?

Conventional wisdom has it that, as the new breed of e-business consultancies fumbles, e-business customers will turn back to the safety of big, traditional IT service providers. After all, the thinking goes, the big guys like Andersen Consulting and PricewaterhouseCoopers may have been a little slower to adapt to the Web, but theyre less prone to the strategy changes and other gyrations of younger consultancies trying to satisfy Wall Street.

Conventional wisdom doesnt always tell the whole story, however. While most traditional consultancies do face less stock market pressure because they are privately held, theyve all been grappling with significant changes of their own over the past year. Most of the Big Five firms that were once part of larger accounting and professional service organizations have been relaunching as independent IT consulting and service companies.

Andersen, for example, is changing its name to Accenture next month after an arbitrator in October finalized its split from Arthur Andersen. Cap Gemini SA in May acquired the consulting practice of Ernst & Young LLP to form Cap Gemini Ernst & Young. PricewaterhouseCoopers was almost acquired by Hewlett-Packard Co. until HP called off the deal last month. KPMG LLP spun off its consulting business, forming KPMG Consulting LLC in January.

Despite all the change, though, analysts watching IT consultancies say that the large companies will still benefit from the financial woes of smaller, Web-focused competitors. Although they may be dealing with their own organizational changes, the big consultancies are able to deliver what e-businesses increasingly want: a wider breadth of strategic consulting and technology integration. Brick-and-mortar companies, not dot-coms, are now the target customers, and theyre demanding the ability to link e-commerce with legacy systems and to engineer enterprisewide technology changes, according to analysts.

“Theres definitely leeriness on the part of customers, who are now kicking themselves, saying, Why didnt we go with Andersen, KPMG or IBM [Global Services]?” said Rich Young, an analyst at The Yankee Group Inc., in Boston. “Those companies now are definitely sitting pretty.”

And its not just larger enterprises that are now favoring larger consultancies. Dot-coms in some cases are following suit. PharmQuest Corp., for example, having developed software and a Web site for the pharmaceutical industry in-house last year, is now considering partnering with two or three systems integrators and is focusing on large ones such as Andersen Consulting.

“There are some [consultancies] we are glad we have not worked with,” said PharmQuest CEO Shankar Hemmady, in San Jose, Calif. “Were not worried about those like Andersen or PricewaterhouseCoopers.”

Its not just more experience working with Fortune 500 companies and a broader range of services that give the traditional consultancies an advantage, experts say. They are often also perceived as a safer choice for the IT or business manager responsible for finding outside help. With the future of some new e-business consultancies uncertain, many wont want to take a risk, said Tom Rodenhauser, an analyst at Consulting Information Services LLC, in Keene, N.H.

As Rodenhauser put it, “You dont get fired for choosing these consultants.”